French colossal fossil Total sent a shockwave through the Alberta oilpatch Wednesday with the announcement that it is writing off C$9.3 billion in assets in the tar sands/oil sands, including $7.3 billion in the Fort Hills mine, which opened just 2½ years ago, and the Surmont thermal oilsands project.
Total is also cancelling its membership in Canada’s pre-eminent fossil lobby group, the Canadian Association of Petroleum Producers (CAPP), and giving up on just over $1 billion in liquefied natural gas (LNG) investments in Australia, The Canadian Press reports.
After adjusting its expectations for future oil prices, Total concluded “that the weakness of investments in the hydrocarbon sector since 2015, accentuated by the health and economic crisis of 2020, will result by 2025 in insufficient worldwide production capacities and rebound in prices,” the company said in a release. “Beyond 2030, given technological developments, particularly in the transportation sector, Total anticipates oil demand will have reached its peak,” and benchmark oil prices will hold in the range of US$50 per barrel.
From that starting point, and “in line with its new Climate Ambition announced on May 5, 2020, which aims at carbon neutrality, Total has reviewed its oil assets that can be qualified as ‘stranded’, meaning with reserves beyond 20 years and high production costs, whose overall reserves may therefore not be produced by 2050,” the release continues. “The only projects identified in this category are the Canadian oil sands projects Fort Hills and Surmont.”
The decision comes just two weeks after Total said it had sealed the deal on a US$20-billion liquefied natural gas (LNG) project in Mozambique, Africa’s biggest project investment ever, with institutional investors from the United States, Japan, the UK, Italy, South Africa, The Netherlands, and Thailand. Friends of the Earth International declared the project “a windfall for the industry, a curse for the country”.
In Alberta, however, “Total has been distancing itself from the oilsands for several years, although a Canadian Press analysis last year revealed it actually produced more from the oilsands in 2018 than any other foreign company,” CP writes. “When it sold its undeveloped Joslyn oilsands mining project to Canadian Natural Resources Ltd. in 2018, it said it was part of a strategy to move away from high-cost oilsands investments. The same rationale was used in reducing its stake in Fort Hills in 2017,” which now stands at 24.6%.
The other two investors in the highly-touted and increasingly-automated Fort Hills project aren’t faring a whole lot better—in May, Calgary-based Suncor Energy took a $1.38-billion impairment charge on its 54.1% stake in the project, while Vancouver-based Teck Resources wrote off $474 million on its 21.3% share and decided to cut costs by dropping its CAPP membership.
“Total’s decision to write down their tar sands assets and quit Canada’s biggest oil lobby group for its opposition to action on climate change underscores the urgency of ensuring that COVID-19 stimulus plans grow a green economy and transition workers securely into it,” said Greenpeace Canada senior energy strategist campaigner Keith Stewart. “As the world transitions away from fossil fuels, starting with the most polluting sources, the tar sands are hemorrhaging investors.”
CAPP and the Alberta government both lined up to criticize Total for abandoning one set of fossil investments while embracing another. “It’s problematic. I think it’s somewhat virtue signaling that there is an orchestrated campaign globally against Canada and this is a visible action they can take to wage some of that pressure,” CAPP President and CEO Tim McMillan told BNN Bloomberg. “But at the end of the day it comes off somewhat hypocritical.”
“At the same time Total is dismissing the leadership of Canadian producers who are doing their part with active strategies that have reduced emissions, they continue to invest in countries such as Myanmar, Nigeria, and Russia,” agreed Alberta Energy Minister and former pipeline executive Sonya Savage. [Follow the links for a snapshot of how well that’s working for them so far—Ed.] “This highly hypocritical decision comes at a time where international energy companies should, in fact, be increasing their investment in Alberta, rather than arbitrarily abandoning a source of a stable, reliable, supply of energy.”
On Wednesday, the Petroleum Services Association of Canada reduced its 2020 activity forecast for the third time, The Canadian Press reports. The association now expects to see 2,300 wells drilled this year, a 43% drop from 4,900 wells in 2019.